Fiat No Longer a Partner for Russian Car Industry

The Russian automobile company GAZ is currently undergoing more changes. It seems that the company decided to suspend production of its Volga D vehicles and to focus attention on a more traditional class of cars, the Volga E. In addition, the company’s administration announced that Fiat might not be a strategic partner for GAZ in the future.

The new General Director of GAZ, Aleksey Barantsev, said Friday that the company was not going to purchase a range of car models from Fiat. “We are capable of renewing our range of models ourselves,” Mr.Barantsev claimed.

In the meantime, GAZ promised to produce a new model of its Volga vehicle, the middle class E. The new vehicle will still be called Volga, but the design of the car will take account of all previous mistakes that were made during the production of previous models. Next year, the Joint Stock Company GAZ is planning to spend some 500 million rubles for the modernization of its Volga cars. As Aleksey Barantsev stated, the objects of modernization would include hanger brackets and speed timing units first and foremost. The costs for these measures will make up 150 and 170 million rubles, respectively. The changes will also embrace light technology and bumpers.

As far as the Volga D is concerned, it was earlier believed that D class would be in demand among Russian middle class customers of GAZ. However, the conditions for the production of this car at a price of eight thousand dollars seem to be less profitable for the company in comparison with Volga E vehicles. Probably, the corrections were introduced with the approved concept of the development of the Russian car industry. It is obvious that if GAZ orientates its activity to another direction, another Russian car giant, the company AvtoVAZ, will have easier conditions after the increase of import tariffs on foreign cars (AvtoVAZ produces D class vehicles).

One has to guess what world car giants will do, since they are as interested in the increase of import tariffs for second-hand cars as Russian car producers are. The competitive ability of a certain Russian car producer will depend on if they attract investments for the development of either the E or D classes of cars in Russia. The situation also depends on the Russian government: to which extent it is ready to create better conditions for domestic car factories rather than for foreign ones.

General Director of GAZ, Aleksey Barantsev, released these statements regarding the change of the company’s activities in Sergey Kiriyenko’s presence (the presidential envoy in the Volga administrative area of Russia). The envoy’s presence, as well as the statement from Barantsev, had PR goals.

Kiriyenko said that he had arrived to visit the company GAZ on an order from President Putin. As Kiriyenko stated, Vladimir Putin wished to look into the matter with GAZ due to public attacks against the factory. Sergey Kiriyenko proved that the situation for the major company of the region was not easy indeed. Yet, the presidential envoy stressed that the company's management found the correct solution. “Our company did not choose a way to cut people’s wages or raise more loans and save more debts against the background of the crisis on the car market,” said Barantsev. It should be mentioned here that Russia’s two major car producers, GAZ and AvtoVAZ, have experienced great difficulties on account of a large number of imported foreign cars. The excessive imports of foreign cars was caused with the uneasy situation concerning the concept of the development of the Russian car industry.

The GAZ management said that the company would cope with the output plan for the current year. The schedule stipulates the production of 200 thousand cars a year. Furthermore, the enterprise paid its income tax this year, for the first time since 1999. According to the information from the press service of JSC GAZ, accounts payable of the enterprise dropped from 7.6 million rubles to 1.8 million. It was also said that the company managed to raise the average worker’s wages by 58%.

The effect of the presidential envoy was intensified with a demonstration of the new Volga model: the GAZ-3110, the Volga-taxi. The new model of the Volga taxi gives more space for passengers in the back seat, as well as more space for luggage.

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